First said its services would encourage passengers to switch from flying and coaches. Chief executive Tim O’Toole said: “Our brand new trains will be cheaper than other rail services, greener than the plane and quicker than the coach.”

And Steve Montgomery, a former ScotRail managing director who now heads First’s UK rail division, said that its passengers would not have less space despite lower fares, saying: “We will not be crushing people in.”

Passenger watchdogs welcomed the decision by the Office of Rail and Road (ORR).

Transport Focus passenger director David Sidebottom said: “Passengers will welcome these extra services. More choice is a positive thing, especially as it can add pressure to keep prices low across all the operators on a route.”

But Perth-based Stagecoach, which owns 90 per cent of VTEC, said the move would hit its franchise, which involves paying £3.3 billion to the Treasury.

The firm has denied persistent rumours of underperformance despite analysts at HSBC claiming in March it was “falling behind its targets”.

Stagecoach chief executive Martin Griffiths said: “We do not believe the granting of these services within a franchised system and without a level playing field is in the best interests of passengers, taxpayers or communities.

“We will assess the ORR decision and implications in detail and review our options.”

ORR director of railway markets and economics John Larkinson said: “These new train services will give passengers more choice on services to Edinburgh and London and provide more frequent trains to towns and cities which are not so well served today.”

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